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What Apple Inc. (AAPL) Stock Needs to Make ANY Waves From Here

'New iPads are coming!' or so the rumor goes, but we'll need much more for AAPL stock to keep pushing north

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Rumor has it that Wall Street might see the newest iPad tablets from Apple Inc. (NASDAQ:AAPL) as early as next week. CEO Tim Cook remains “very bullish” on the category, but it’s going to take more than a refresh like last fall’s iPhone 7 to really move AAPL stock.

It’s going to take a revelation.

The challenge that management faces here isn’t about innovation. I’m sure the iPads will pack just enough fresh functionality — battery life, screen response, processing power — to keep the upgrade cycle rolling.

Remember, the iPhone 7 didn’t deliver any real “killer apps” beyond incremental improvements here and there, but sales in its launch quarter still spiked 5% above year-ago levels.

For tech traders who have learned to obsess over every tick on the AAPL balance sheet, that’s a product worthy of a standing ovation. A year ago, iPhone sales were flat at best, so that 5% bump was a big driver in the stock’s 30% surge since Cook announced the new release of the phones on Sept. 7.

AAPL stock chart

However, even if the new iPads perform on roughly that level, they have a much deeper decline to overcome and a much lower base to build on.

That’s why the problem for AAPL stock isn’t a problem of innovation. The most miraculous must-have tablet computer anyone in Cupertino can conceive is still a hostage to brute economic scale.

On the top line, 70% of AAPL is phones. Barely 7% of the company’s revenue comes from tablet computing, and that piece of the overall footprint has actually shrunk as media and other services push it aside. The iTunes/ApplePay/AppleCare ecosystem now plays a bigger role in the sum of the parts than all the iPads put together.

And while the service side is growing at a healthy 18%-26% per year, high-end tablet manufacturers like AAPL have struggled to hang onto the sweetest slice of a declining global market.

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